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2013 – Brazil Nerve Center

Though the company built its Brazil facilities on spec, lease requests poured in once customers saw the modern buildings and high-tech amenities.

In 2006, Prologis legacy company AMB conducted a preliminary study for entry into Brazil and discovered a deep need for logistic facilities. At the time, the population of Brazil was 180 million, making it the most populous country in South America. São Paulo and Rio de Janeiro were vertical cities with thriving economies that boasted an impressive array of modern office and residential buildings.

When it came to logistics, however, Brazil’s industrial spaces were archaic. Flimsy canopies and thin metal walls offered little protection against the elements. Too many columns within the structures made it difficult to maneuver products in and out. And rudimentary security systems invited crime.

With little competition, the decision to enter the Brazilian market was relatively easy. Breaking into the Brazilian market, however, proved more daunting.

The first hurdle was land acquisition. In Brazil, much of the land is owned by families and individuals who are interested in equity partnerships rather than cash payments.

“There have been periods where inflation has been 100%, so landowners don’t want cash, they want a stake in the development,” said Gene Reilly, Prologis CEO, the Americas. “Credibility is extremely important. When these sellers look across the table, they want to do a deal with someone they can trust.”

To help navigate the market and ensure the facilities were built to international standards, Prologis legacy company AMB created a 50/50 joint venture partnership with Cyrela Commercial Properties, one of the largest developers in Brazil.

These buildings, built on a speculative basis without a single lease in place before construction, boasted amenities unseen in the region, from high-tech security systems and concrete walls to improved docking stations and expansive parking areas. Upon completion, lease requests from domestic as well as international companies poured in—many from companies wanting to lease spaces 500,000 square feet and larger.

Prologis has built and developed several million square feet of space, and all buildings that were constructed on spec were fully leased upon completion. Although São Paulo is home to more than 11 million people, it contains only 50 million square feet of logistics space, providing extensive opportunities for future development.

“We’re really proud of what we’ve done, but what’s more exciting is our potential,” Reilly said. “We’ve got an unbelievable land bank in a market where it’s hard to find land. I think we have five years of building as fast as we possibly can—maybe 10 years. It’s definitely the future.”